I have yet to meet a mortgage intermediary who feels the income from mortgage advising alone is much better than derisory. It barely pays for customer acquisition, let alone the fully loaded costs of operating as a regulated adviser.
Like all sensible brokers, our mortgage businesses have for some time been concentrating on providing additional services to clients, generating non-core but essential revenue. With some sterling support from our various corporate partners, we have been able to test consumer appetite for many other products and services elsewhere in the property food chain. It is a good job we did, yet many brokers are still missing a trick.
A major component of our activity as a group of businesses is arranging residential surveys, so we cross-fertilised surveying services into our mortgage businesses, but so should all mortgage brokers. As a proposition for mortgage customers, there are compelling reasons why obtaining a survey report is vitally important. Yet in many cases, the benefits of obtaining a survey for the client’s benefit are not fully explained to clients.
According to the Residential Property Surveyors Association, 80 per cent of homebuyers believe they are getting a survey when they are simply paying for the lender’s valuation, and they will not even get a copy of that. Most buyers misunderstand the point of the lender’s valuation for mortgage purposes (the clue is in the name) and believe this report protects them. According to the RPSA, just one in five buyers get a building or condition report.
Brokers might reasonably feel this is a treating customers fairly consideration. Failing to get the correct survey could mean essential repairs are a shock and can set buyers back thousands of pounds. According to the Royal Institution of Chartered Surveyors’ recent research, a quarter of buyers who fail to get a survey will need to stump up £1,800 in unforeseen repair costs. Around £58m was spent in total by over 32,000 homebuyers on unanticipated repairs in the last year. Getting the right survey will mean clients can proceed with the property sale fully aware of any problems and 25 per cent of those who get a survey, manage to negotiate a reduction of the purchase price.
The common misconception among many intermediaries is that residential surveys could reveal issues that might jeopardise their mortgage sale, so they perhaps refrain from getting involved. Are you party to a customer proceeding in blissful ignorance? Anxious brokers should consider research in Halifax’s retail division which suggests there is a better chance of the sale proceeding to completion when a private survey is obtained.
With a mortgage market dominated by intermediaries, the responsibility for consumer education lies with brokers. I am pleased to see that Sesame PMS has again taken the lead, providing facilities of this nature to its appointed representatives, enabling such firm to protect their customers properly as well as to generate a valuable incremental income stream.
Rob Clifford is chief executive at If I Were You